Lending — Platform Indemnification

Status: v0.1 draft. Not in force. Counsel posture confirmed by Drew 2026-06-05; per-jurisdiction counsel review continues as a parallel workstream, not a build gate (was: Counsel posture confirmed by Drew 2026-06-05; counsel review continues as a parallel workstream, not a build gate. This document defines the limits of Circlworld's exposure to claims arising from cooperative lending activity on the Platform. Read alongside the Lending Center charter, the Member Borrowing Agreement, and the Member Pool Contributor Agreement.

Where this sits in the Custody Framework

This document operates under Category B of the Custody Framework Charter — the escrow-only category that governs lending pool capital, loan accounts, collateral escrow, and the Circle Protection Reserve. Member vote does not apply to Category B custody; the rule is constitutional. Accounts are opened in the name of the Members' own co-operative legal form, with a multi-signature mandate held by the Lending Committee.

Category A — regular cycle contributions in single-jurisdiction Circles, which may be Member-to-member or escrow-held by Member vote — is outside this surface. Category C — Circles that cross a jurisdictional boundary — adds the escrow-only rule to all funds in those Circles; this surface inherits Category C when the Circle is cross-border.

1. Who Circlworld is, for the purposes of this document

For the purposes of every lending transaction on the Platform, Circlworld (operated by the entity identified in the Terms of Service) is the underwriting + governance + record-keeping operator. Circlworld is not the lender, not the borrower, not the counterparty to any loan, not a deposit-taker, and not the holder of any funds.

The lender is the circle (at L0/L1) or federation (at L2), acting through its own member-constituted co-operative legal form registered in your jurisdiction — its own collective vehicle, not a separate or third-party entity — as identified on the loan disclosure form. The pool contributors are the fellow Members whose pool stakes back the loan, identified on the same disclosure form by pro-rata share. Your loan contract is with your circle's / federation's lending pool (in its own co-operative form). The pool contributors' contracts are with the same pool. A bank or credit union may custody the dedicated multi-signature lending account but is the account provider only and is never the lender. No party's contract is with Circlworld.

This document explains what that means for indemnification.

2. The borrower's covenant of indemnification

By accepting the Member Borrowing Agreement, you (the borrower) acknowledge and agree:

You will not sue Circlworld for the loan itself. A claim about repayment, balance, interest, fees, late payments, or default belongs against your circle's / federation's lending pool (in its own co-operative form) and (where applicable) the pool contributors, in the courts of that co-operative form's jurisdiction.
You will not sue Circlworld for the underwriting decision. The decision to extend or decline a loan, the size of the unsecured/secured split, and the collateral required were produced by the published formulas applied to inputs you provided. If you dispute the inputs (e.g. Standing miscalculation) you may raise it through the Dispute Settlement Centre under the Lending Dispute Pathway. If you dispute the formula itself, the change mechanism is the Petitions Office, not litigation.
You will not sue Circlworld for collateral liquidation. When you posted collateral, you authorised your circle's / federation's lending pool (in its own co-operative form) to call it on default per the Collateral Terms. The Platform records the liquidation; it does not perform it. The party that performed it is your circle's / federation's own co-operative form and/or the escrow provider.
You will not sue Circlworld for the consequences of default. Standing penalty, Financial Reliability Record, and borrowing freeze are documented platform consequences of default. They are not litigable as a separate matter from the underlying loan.
You will indemnify Circlworld against any third-party claim arising from your conduct in connection with a loan — including but not limited to fraudulent representations about income, identity, residence, or the existence of collateral you did not own.
Circlworld's total liability to you, across every cause of action arising from any lending transaction, is capped at the lower of (a) the platform fees you paid in connection with that transaction in the twelve months prior to the claim, or (b) £100 / equivalent in your jurisdiction's currency. This cap is intentionally low because Circlworld is not the counterparty to the loan; the loan-side recovery sits with the vehicle.

3. The funder's covenant of indemnification

By accepting the Member Pool Contributor Agreement, you (the pool contributor) acknowledge and agree:

You will not sue Circlworld for contribution loss. Your capital is at risk. If a borrower defaults and the waterfall does not fully recover, the residual is shared by you and the other pool contributors pro-rata to your share. Circlworld does not guarantee repayment and is not the counterparty to your pool contribution. The counterparty is your circle's / federation's lending pool (in its own co-operative form).
You will not sue Circlworld for pool performance. The pool's reserve, concentration caps, and loan-to-pool ratio are documented governance parameters. The Platform records the parameters; the vehicle and the pool's elected council operate within them. Performance is a function of the borrowers' conduct, not the Platform's.
You will not sue Circlworld for the insolvency of your circle's / federation's own co-operative form. That co-operative form is the collective vehicle of the Members. Its solvency is governed by the co-operative-society / credit-union law of its jurisdiction. Insolvency outcomes for active loans, posted collateral, and your pool stake are governed by that law and the resolution authority appointed under it.
You will indemnify Circlworld against any third-party claim arising from your conduct in connection with a pool — including but not limited to misrepresenting the source of staked capital, falsely declaring residency to access a jurisdiction-bounded pool, or misusing the Platform to coordinate lending decisions outside the documented governance process.
Circlworld's total liability to you, across every cause of action arising from any pool you funded, is capped at the lower of (a) the platform fees you paid in connection with that pool in the twelve months prior to the claim, or (b) £100 / equivalent in your jurisdiction's currency. Same reasoning as §2.6.

4. The guarantor's covenant of indemnification

A Member who guarantees another's loan accepts the borrower's covenant in §2 in addition to the guarantor-specific terms in the Guarantor Terms. Guarantors do not sue Circlworld for being called on; the call is performed by the vehicle under the joint-and-several clause the guarantor signed.

5. Claims that survive these covenants

Circlworld remains liable, without the cap in §§ 2.6 and 3.5, for:

Wilful misconduct or gross negligence by the Platform operator — established by a court of competent jurisdiction.
Material breach of the published audit-trail commitments — if a loan record is intentionally altered or concealed in a manner that disadvantages a borrower or funder.
Failure to apply the underwriting formula as published — if the inputs were correct and the formula was correctly stated in the loan disclosure but the actual decision deviated.
Statutory liability that cannot be excluded by contract under the law of your jurisdiction — including, in the United Kingdom, liability under the Consumer Rights Act 2015 for the services Circlworld itself provides (the platform, the underwriting engine), and statutory liability under the Financial Services and Markets Act 2000 to the extent any such liability applies despite Circlworld's non-lender posture.

Nothing in §§ 2 or 3 limits any liability that cannot be excluded by contract under the law of your jurisdiction.

6. Class action waiver and jurisdiction selection

To the extent permitted by the law of your jurisdiction:

Claims against Circlworld arising from lending activity are brought individually, not as part of a class, consolidated, or representative action.
Claims against Circlworld are brought in the courts of the jurisdiction of the circle's / federation's own co-operative legal form that issued the loan, applying that jurisdiction's substantive law.
Where local consumer-protection law overrides this selection (it does in many jurisdictions for individual consumers), the local rule applies.

7. Notice and cure

Before commencing any claim against Circlworld arising from lending activity, the claimant will:

Raise the dispute through the Dispute Settlement Centre under the Lending Dispute Pathway, at no charge for Stage 1 Conciliation.
Where Stage 1 does not resolve the matter, escalate to Stage 2 Mediation. The cost split is as documented in the pathway.
Where Stage 2 does not resolve the matter and the disputed amount is within the platform's small-claims threshold, escalate to Stage 3 Decision Room.
Only where the matter remains unresolved through all three stages, or where the amount exceeds the small-claims threshold, may a court claim be commenced.

The Platform will be given at least thirty (30) days written notice of an intended court claim, at the address in the Terms of Service, before filing.

8. Severability

If any clause of this document is held unenforceable by a court of competent jurisdiction, the remaining clauses remain in force. The unenforceable clause is replaced with the closest enforceable formulation consistent with the parties' original intent.

9. Governing law

This document is governed by the law of the circle's / federation's own co-operative legal form's jurisdiction for any matter related to a specific loan or pool. For matters related to Circlworld's own conduct as Platform operator (the underwriting engine, the audit trail, the governance plumbing), the Terms of Service govern.

10. Amendments

This document is amendable through the Member-led Petitions Office process documented in the Cultural Architecture Policy. Material amendments follow the Material Change procedure in the Terms of Service clause 13.

Reminder: this is v0.1 draft. It is not in force. Read it. Note where it doesn't match the law of your jurisdiction. Comment through the Petitions Office. Counsel sign-off and a Member-readable change history will accompany activation.